USD/JPY has had a nice run following the hawkish hike by the FED but took its time to consolidate. What’s next?

Here is their view, courtesy of eFXnews:

The JPY has weakened sharply since November when Trump was elected as the next US president. The move higher in USD/JPY has among others been driven by risk appetite, higher yields on 10Y US treasuries and a higher oil price. According to the IMM data, investors appear to have turned around their positioning and are now short the JPY for the first time since the beginning of 2016.

We have lifted our USD/JPY targets as we expect the JPY to continue to suffer in an environment with rising global bond yields and a higher oil price.

We target USD/JPY at 121 in 1M and 119 in 3M.

Longer term, we expect USD/JPY to stabilise targeting 118 in 6-12M as we expect portfolio outflows out of Japan to counter the underlying appreciation pressure in the JPY stemming from fundamentals.